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Fitch Assigns Initial L-T IDR of 'BBB+' to Dominion Gas; Affirms Dominion Ratings



  Fitch Assigns Initial L-T IDR of 'BBB+' to Dominion Gas; Affirms Dominion
  Ratings

Business Wire

NEW YORK -- October 11, 2013

Fitch Ratings has affirmed the ratings of Dominion Resources, Inc. (DRI) and
assigned a long-term Issuer Default Rating (IDR) of 'BBB+' to its newly
established subsidiary, Dominion Gas Holdings, LLC (D-Gas). Fitch expects to
assign a 'BBB+' rating to the D-Gas senior unsecured notes which are expected
to be sized and priced next week.

Proceeds will be used to repay intercompany borrowings. The notes will rank on
parity in right of payment with existing and future senior unsecured debt.

The Rating Outlook for both companies is Stable. A full list of ratings is
provided at the end of this press release.

KEY RATING DRIVERS:

--The establishment of D-Gas will not result in a material deviation from
Fitch's earlier consolidated DRI forecast;

--D-Gas capitalization is leverage neutral to DRI;

--Balanced regulatory treatment at FERC and PUCO supports predictable cash
flows at D-Gas;

--Strategic location in the Marcellus and Utica shale regions supports D-Gas
growth;

--Sufficient consolidated liquidity at DRI.

DRI:

Affirmation and Stable Outlook: Fitch considers the creation of D-Gas as
credit neutral to DRI. D-Gas is a first-tier holding company of DRI created to
own the largely regulated gas assets of DRI consisting of: Dominion
Transmission, Inc. (DTI); The East Ohio Gas Co. (DEO); and, a 24.7% ownership
interest in the Iroquois Gas Transmission System, L.P. interstate natural gas
pipeline (Dominion Iroquois). As the 100% owner of D-Gas, DRI's consolidated
cash flows from the underlying D-Gas assets are unchanged. The creation of
D-Gas enhances financial flexibility and long term issuance options
independent of DRI's own financing plans. Over the near term; however, D-Gas
will be dependent on DRI for short term financing and liquidity.

D-Gas's capitalization is leverage neutral to the company's consolidated
capital structure, and Fitch's five-year consolidated forecast remains largely
unchanged since its ratings affirmation on July 22, 2013. Pro forma capital
funding needs related to DTI and DEO will be financed at D-Gas which in turn
will proportionately reduce incremental new debt issuance at the holding
company. Furthermore, DRI can expect to receive sustainable cash distributions
from D-Gas to support holding company funding obligations.

Dominion's ratings and Stable Outlook continue to consider the company's large
diverse asset base, including significant contribution from low-risk regulated
businesses; and, an aggressive capital investment plan which includes
construction of the Cove Point liquefaction export facility, funding of which
limits near-term de-levering of holding company debt which is considered high
relative to peers. As discussed, the formation of D-Gas will reduce
incremental new debt issuance at the holding company.

D-Gas:

Rating Rationale: D-Gas's rating reflects both its standalone financial
profile as well as its linkage to DRI. Initially, D-Gas will be dependent on
DRI for liquidity and short-term working capital needs.

Stable Outlook: The company's Stable Outlook considers a strong financial
profile, fair regulatory treatment and strategically located assets in the
Marcellus and Utica shale regions.

Low-risk Company Profile: D-Gas has a solid credit profile, and delivers
predictable cash flows. DTI, the largest contributor of D-Gas earnings,
estimated by Fitch at 70% of EBITDA, is an integrated gas transmission
business. Key services include gas transport, storage, and gathering and
processing. From a credit perspective, the Federal Energy Regulatory
Commission (FERC) regulates DTI rates and collateral requirements, DTI
receives fee for service, and commodity price risk is limited. A large
proportion of transport and storage capacity is under contracts extending
beyond 2015. The FERC also regulates Iroquois Gas Transmission System, L.P.

DEO is a Public Utility Commission of Ohio (PUCO)-regulated gas utility with
transmission, distribution and gathering lines located in eastern and western
Ohio. The utility also operates underground storage assets. Fitch considers
regulatory treatment in Ohio as fairly balanced. The straight-fixed variable
(SFV) rate design applicable to most customers covers a majority of fixed
costs in the customer charge, with other costs recovered through a volumetric
charge for non-residential customers. Rate design features include riders to
recover specific costs that fluctuate over time. DEO has no base rate filings
pending, and in April 2013 an adjustment for the recovery of costs incurred
and a return on rate base for 2012 and cumulative capital investments for
pipeline infrastructure replacements was approved by PUCO.

While supplier choice is not required for natural gas customers in Ohio, DEO
offers retail choice to its residential and commercial customers and is the
provider of last resort (POLR) in the event of an alternate supplier default.
The standard service offer pricing mechanism assumes a monthly market price
which provides greater pricing transparency for retail choice customers.

Strong Financial Profile: D-Gas operates mature, free cash flow positive
assets. Fitch expects financial metrics to be robust relative to guidelines
for the rating category and risk profile, with leverage at or near 3 times (x)
EBITDA through 2017. Management forecasts D-Gas EBITDA upwards of $1 billion
over the forecast period. Fitch considers DTI assets favorably positioned in
the Marcellus and Utica shale regions to support a solid growth platform. The
company's modest capital plan is largely driven by maintenance spending and
transmission-related growth projects.

Fitch's assessment assumes a sustainable dividend from D-Gas to DRI through
2017 to support holding company funding obligations. With limited funding
obligations at D-Gas, and external debt financing expected to supplement cash
available to fund capital investments, Fitch expects D-Gas can maintain a
balanced capital structure absent equity infusions from DRI.

Liquidity: D-Gas is not a named borrower on DRI bank credit facilities, and
short-term funding needs are met through an intercompany revolving credit
facility with DRI. DRI has total bank credit capacity of $3.5 billion, which
is viewed by Fitch as adequate to support company short-term funding needs. At
June 30, 2013, Fitch calculated DRI consolidated liquidity at $1.57 billion,
which includes bank credit totaling $1.38 billion, and $190 million of
cash-on-hand. Fitch considers DRI and subsidiary access to the capital markets
and bank credit as unrestricted.

Parent and Subsidiary Linkages: Fitch considers the formation of D-Gas as a
first step in the corporate realignment to create a platform to highlight and
possibly monetize DRI's gas and midstream assets. In a second step, DRI's
remaining, directly-owned gas and midstream assets, mostly consisting of Cove
Point, an import LNG facility and the Blue Racer joint venture, a midstream
gatherer and processor in the Utica Shale region, are candidates for a Master
Limited Partnership (MLP) which DRI plans to form in 2014. Asset drop downs
into newly formed MLPs, especially very large individual assets such as Cove
Point, are typically dropped down in stages over a multi-year time period.
Fitch considers additional corporate transactions for DRI's portfolio of gas
and midstream assets likely.

Given the evolving corporate and ownership structure of DRI's gas and
midstream assets, ratings of DRI and rating alignments of DRI's primary
subsidiaries may change over time. In the interim, the creation of D-Gas
enhances financial flexibility in order to raise capital in a period of large
capital investments that the DRI family will incur over the next few years.

RATING SENSITIVITIES

--DRI: Subordination of cash flows resulting in the event of corporate
spin-offs along with higher parent level debt than that considered in Fitch's
forecast could lead to a negative rating action.

--DRI: An aggressive multi-year capital investment plan exposes the company to
execution risk, including construction delays and cost-overruns, which could
pressure financial metrics if debt financed.

--D-Gas: Changes in tariffs for DRI's regulated assets could pressure ratings.

--D-Gas: Changes in financial management policies or acquisitions that could
lead to higher leverage and result in a rating downgrade.

Fitch has affirmed the following ratings:

Dominion Resources

--Long-term IDR at 'BBB+';

--Senior unsecured debt and revenue bonds at 'BBB+';

--Preferred and junior subordinated debt at 'BBB-';

--Short-term IDR at 'F2';

--Commercial paper (CP) at 'F2'.

Consolidated Natural Gas Co. (debt assumed by Dominion Resources)

--Long-term IDR at 'BBB+';

--Senior unsecured debt and revenue bonds at 'BBB+'.

The Rating Outlook is Stable.

Fitch has assigned the following new ratings:

Dominion Gas Holdings, LLC

--Long-term IDR at 'BBB+';

--Senior unsecured debt at 'BBB+(exp)'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating North American Utilities, Gas and Water Companies', May 16, 2011;

--'Recovery Ratings and Notching Criteria for Utilities', Nov. 13, 2012;

--'Corporate Rating Methodology: Including Short-term Ratings and Parent and
Subsidiary Linkage', Aug. 5, 2013.

Applicable Criteria and Related Research:

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693750

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=804810

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings, Inc.
Primary Analyst
Lindsay Minneman, +1-212-908-0592
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 1004
or
Secondary Analyst
Rob Hornick, +1-212-908-0523
Senior Director
or
Committee Chairperson
Glen Grabelsky, +1-212-908-0577
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com
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